Poultry giant Avara Foods fell to a loss of more than £16m last year in the face of rising production costs, lower demand and “significant labour” challenges, its latest accounts have shown.
Turnover grew, by 5.8% to £1.26bn for the year to 31 May 2022. However, the supplier saw a profit after tax of £16.9m in its previous accounting period swing to a £16.1m loss, according to its annual report and accounts, posted at Companies House.
Operating profit similarly swung from £23m in 2020/21 to an operating loss of £21.3m, while gross profit margin slumped from 10.1% to 6.1%, with the processor bemoaning “inflationary pressures not seen for a decade”.
“The impact [of inflation, exacerbated by war in Ukraine] on the cost of living squeezed consumer spending, with demand falling from the peaks recorded during the Covid pandemic,” Avara’s accounts claimed.
Its financial performance reflected a “difficult trading period”, the supplier said, with labour shortages during the summer of 2021 resulting in a short-term fall in throughput – which also negatively affected its margin mix.
Additionally, Avara pointed to retailers seeking to “find a balance between sustainable pricing and sustainable sales” due to the cost of living crisis. And as a result, cost inflation had been “slow to pass through the supply chain”, it said.
“Although customers have supported Avara with double-digit price increases, given year on year inflationary costs of nearly £85m, the lower level and delayed timing of increases have materially impacted earnings performance and revenues by circa £24m during the trading year,” it added.
Earnings were further hit by avian flu, to the tune of about £5m, the poultry giant said.
And conditions were expected to remain difficult and even worsen in the current financial year.
“What you’re seeing at Avara is pretty much mirrored across our sector and to be expected given the prevailing market conditions,” said CEO Andy Dawkins.
“Supply is up, overall demand is down, and cost inflation isn’t being recovered in full. Combine that with export restrictions, labour challenges and the inability to cover the cost of avian influenza through either government compensation or adequate insurance, and you can see the pressure that the whole sector is under.”
On a more positive note, the 2021/22 financial year also saw Avara continue to advance on commitments under its ‘For Good’ sustainability agenda, including “significant progress” against its carbon emission reduction targets.
It was first in the UK to launch new packaging formats, enabling greater automation while reducing plastic use by more than 50%. This significant investment in technology and innovation also created higher skilled roles and opportunities for people at Avara.
“It says a lot about our business and our people,” continued Dawkins, “that amid unprecedented challenge, we have continued to invest in productivity and efficiency, stayed true to our core values and delivered a further absolute reduction in our carbon emissions. Being first to market with a solution that delivers three commitments in one is a great example of how we will compete and succeed in the years ahead.”
Dawkins said 2023 would be “tough for all businesses, and there’s no silver bullet, but Avara is a resilient business with a strong culture”.
The company was “already demonstrating our ability to adapt at speed to emerge from this period in good shape, by focusing on great value, innovation, service for customers underpinned by our commitment to our people, planet and the wider community we serve”, Dawkins said.
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